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Online International Interdisciplinary Research Journal, {Bi-Monthly}, ISSN2249-9598, Volume-III, Issue-VI, Nov-Dec2013

Implications of TRIPs Agreement on India with special reference to


Pharmaceutical Sector
Parmod Malik
Coordinator, Centre for IPR studies, Dept. of Laws, BPS Women University, Sonipat,
Haryana, India
MAIN THEME OF RESEARCH ARTICLE
The Uruguay Round (1986 1994) was the turning point in the history of
Intellectual Property Rights. This round included the Agreement on Intellectual
Property Rights under which minimum uniform laws are to be carried out. The
Agreement on TRIPs came into force on 1 January 1995 and is to be implemented
over a six-year period ending 31 December 2000 for developed countries and over a
ten-year period ending 31 December 2004 for developing countriesIndia has always
remained committed to the WTO and in every sphere; it has stood by those
commitments. Going by such commitments to the WTO, India has amended its
Intellectual Property Laws. Apart from meeting WTO obligations India has placed
this new regime due to its economic rational. It enables pioneering firms lead time
to recoup sunk cost on research and development1. India is ranked as the fastest
emerging economy and a major global player in the years to come. The country has
the largest scientific and technical human resources among top five countries in the
world. India cannot afford to remain in isolation, disregarding the norms of
international intellectual property rights convention. A careful consideration is
equally essential in the future interest of macro-level development2.
TRIPs was one of the most contentious issues in the Uruguay Round of
multilateral trade negotiations, which was concluded in 1994 at Marrakesh. As a
member of the World Trade Organisation (WTO), and having signed the General
Agreement on Tariff and Trade (GATT), India has agreed to comply with all the
instruments and annexes of GATT, including Trade Related Aspects of Intellectual
Property Rights (TRIPs).Because of WTO, India has to amend its intellectual property
laws .India was forced to comply with the TRIPs agreement. After the formation of
WTO in 1995, the India being its member has to implement the TRIPs agreement in
toto. The commitment under TRIPs agreement compelled India to amend its
intellectual property laws. India has implemented the TRIPs by amending its
intellectual property laws mainly patent thrice3.
OBJECTIVE OF RESEARCH WORK
The importance of the problem lies in the fact that it helps to have a comprehensive
grasp of the problems faced by Indian legislators relating to amendments made to the
Indian intellectual property laws in accordance with TRIPs. Therefore, the crucial
question is how the India has made their laws TRIPs compatible and at the same time
safeguards her core developmental objectives. There is no other international
organization whose policies and actions have as wide an economic and social
ramification and impact as the WTO4.The importance of the problem primarily lies in
the fact that India being a representative of the developing countries has to safeguard
the interest of all the developing and underdeveloped countries. Another thing is that

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to examine the whether India has taken the advantage of the TRIPs flexibility in
amending Indian Patent Act 1970.This is followed by an analysis of the potential
impact of these changes on Indian Industry. In this study, the researcher specifically
examine the impact of these amendments on the Indian Pharmaceutical sector, which
is one sector of the Indian economy that is most likely to be affected by the emerging
patent regime, and the possible ways in which it could adapt to these changes.
RESEARCH METHODOLOGY
The research methodology adopted for the study likely implications of WTO TRIPs
agreement on India is doctrinal in nature. The sources for the same shall essentially be
secondary. For the present study the researcher shall rely upon library resources,
journals and articles from magazines and news papers, web journals and legal
databases. Critical, comparative and analytical methods are employed with regard to
the analysis of the role of the TRIPs agreement in international Perspective.
INTRODUCTION
In a democratic country, like India, it is not easy to shift the policy against
public interest. India was in the difficult situation of protecting peoples interest on
the one hand and fulfilling the WTOs agreement of TRIPs at the other. A successful
patent policy of any developing country is one that strikes a clear balance between
protecting the rights of innovators & services at affordable prices to the population.
Indias patent policy so long has been, infact, protecting the interest of public more
than that of the monopoly rights. The question is that whether the amendment to the
Indian Patents Act, 1970 has taken advantage of the provisions available under the
TRIPs agreement, and look at the exemption, exception and compulsory licensing
provisions in Pharmaceuticals5.
Intellectual Property rights have generated strong impact on the modern day
life. Therefore, the impact of IPR is enormous and on the modern day life. These IPRs
were promoted in an ever seen manner by the TRIPs agreement. The TRIPs
agreement has mandated its members states to implement the provisions of the
agreement in order to promote and protect IPRs. Members states are asked to provide
protection to different IPRs by making necessary adjustments in their existing laws or
enacting new laws. India, being a member state to the TRIPs agreement brought
changes in its IPRs laws. The preceding fifteen years have seen many new IPR
enactments. With globalization, liberalization and privatization, the ambit of IPR has
grown multifold and its importance has amplified, having a profound impact on
commercial interests6.
IMPACT ON EXISTING LEGAL FRAMEWORK
The agreement on TRIPs prescribes norms and standards in respect of copy rights,
Trade Marks, Industrial Design, Geographical Indications, patents etc. It was the
impact of the TRIPs on India that India brought changes in its IPRs laws. The
preceding fifteen years have seen many new IPR enactments. With globalization,
liberalization and privatization, the ambit of IPR has grown multifold and its
importance has amplified, having a profound impact on commercial interests7.
IPR have generated strong impact on the modern day life. These IPRs were
members states to implement the provisions of the agreement in order to promote and

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protect the IPRs. Members states have been asked to provide protection to different
IPRs by making necessary adjustments in their existing laws or by enacting new laws.
In order to fulfill such obligations, members states have amended their laws or have
brought up new legislations. India being a member state to the TRIPs agreement
brought changes in its IP Laws in fulfillment of its obligations under the agreement8.
The TRIPs agreement brought changes in the existing framework on the IPRs, which
had impact on the entire world The TRIPs agreement uniforms and rationalizes all the
existing international agreements on different areas of IPRs. It provides for the blue
print for the protection of all the different forms of IPRs9.
IMPACT ON COPYRIGHT LAW
The Copyright Act, 195710 has been amended to include computer program as literary
work as required by Article 10 of the TRIPs11 Agreement.
IMPACT ON TRADE MARK LAW
The Trade and Merchandise marks Act was passed in the year 1958.Since then it has
been amended several times. Moreover in view of developments in trading and
commercial practices, need for simplification and harmonization of trade mark
management system, it was necessary to bring out a comprehensive legislation on the
subject. Accordingly the Trade marks Act 1999 was passed12.The Trade and
Merchandise Marks Act, 195813 has been replaced with the Trade Marks Act, 199914
which includes protection of well-known marks, certification marks and collective
marks. It now provides for registration of trade mark for services as well. This is in
compliance with Article 16 of the TRIPs Agreement.
IMPACT ON INDIAN PATENT LAW
Changes into the Indian patent laws have been necessitated by Indias accession to the
world Trade Organisation, as one of the founder members,in January 1995.15
The Agreement helps India to introduce the changes at three different stages. To
satisfy the first set of obligations, the Patent (Amendment) Act,
1999 was enacted after India lost the dispute with USA in WTO16. In pursuance of the
TRIPs agreement negotiated during the Uruguay Round, the Patent Act ,1970 was
first amended in March 1999 to introduce the transitional mailbox facility from
1January 1995 to receive and hold product patent applications in the field of
pharmaceutical, agriculture and chemicals until 1 January 2005.The second
amendment to the act was made in June 2002 to meet obligations under the TRIPs
agreement relating to modifications in the provisions concerning among other issues,
term of patent protection, rights of patentee and Compulsory licensing. This included
changes in patentable inventions, grant of new rights, extension of the term of
protection, provision for reversal of burden of proof in case of process patent
infringement and conditions for compulsory licenses17.
The third amendment required to meet obligations under TRIPs agreement introduce
product patent protection in all fields of technology18. The Patent (Amendment) Act,
2005 make the Indian patent Act fully compatible19.
Other recent legislations include the Geographical Indications of Goods (Registration
and Protection) Act, 1999, The Designs Act20, 2000 and The Protection of Plant
Varieties and Farmers' Rights Act, 2001.

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IMPACT ON FOOD SECTOR


The food sector in the country will also have to face new challenges in the new patent
regime. Different processes and products will become patentable. Therefore, there is
need to document all the traditional processes as well as products with a view to
reduce the number of controversies over claims for patent rights21.
One of the serious implications of the treaty is that when the industrial countries could
strengthen their control over global agriculture by keeping their food security intact,
developing countries are called upon to dismantle their food security system22.
INDIAN CONSUMERS
Fears have been raised in several quarters, including consumers and industry on the
possible impact on them, particularly the pharmaceuticals. Consumer fear the product
patent may lead to price hike, making medicines unaffordable to the poor. However,
government has clarified that the law is prospective and covers an insignificant
percentage of medicines23.
With the introduction of product patents, the inventor will try to maximize his profits
and therefore price of drug higher than if there were no patents. Correspondingly, the
consumption of the drug will be lower. This represents an indirect welfare loss to
Indian consumers because of higher prices associated with introducing product
patents. In addition to this are the direct costs of administrating the patent system and
enforcing patentee rights through the courts in case there are infringing disputes24.
Thus patented products would be sold at monopolistic prices devoid of any
competition resulting in still high price for the consumers.
IMPACT ON INNOVATIONS
Many countries of the world, including India, The implementation of TRIPs
worldwide represents a step in the opposite direction have achieved self-sufficiency
in knowledge intensive sectors by allowing for a loosely defined intellectual
property rights (IPR) regime and its impact on the production and innovative
capacity of developing countries in knowledge intensive sectors is not at all clear.
Taking India as representative of a technologically advanced developing country,
and the biotech based segment of the pharmaceutical industry as an example of an
emerging knowledge intensive sector, we examine the possible impact of TRIPs on
the incentives and ability to innovate. The conclusion is that TRIPs is not likely to
have a significant impact on incentives for innovation creation in the biotech
segment25.
The strengthening of the IPR regime world wide as part of the TRIPs agreement
might adversely affect the technological activity in the developing countries by
choking the spill overs of knowledge fro industrialized countries to developing
countries26.
The provision of product patent on many industrial products might affect adversely
the process of innovative activities in the developing countries enterprises. It is true
that the development of many products is beyond the capability of most developing
countries in view of huge resources involved27.
The TRIPs agreement was born to protect the interests of the industry, trade and
services. Whereas the higher standard of protection is relatively advantageous for the
developed economies which are ahead of the developing countries in terms of

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innovations and research and development among developing countries it is less


advantageous for those where the domestic industry is not very strong to invest in R
and D to pursue new product development or process development skills28.
The increase in the period of the patent protection and a stricter enforcement of
patenting rules and regulations would increase the cost of technology acquisition for
Indian industry29.
Impact of TRIPs on Indian Pharmaceutical Sector
The most adverse impact of the TRIPs Agreement is going to be on the health sector
of the developing countries. The role of patent in maintaining monopoly and
restrictive practices in Pharmaceutical industries was identified by the UN Agency
like UNCTAD in the 70s itself. It was this realisation which prompted the developed
and developing countries to deny or limit Pharmaceutical patents till recently. India is
a glaring example in this regard. After denying product patent under the 1970 Act, the
Indian domestic Pharmaceutical industry became an export surplus industry.
The 40000 crore domestic industry fears that increased competition, import surges
and MNCs would lead to a non level playing field. So far, the pharmaceutical
industry was covered only by process patent, which allowed them to reverse engineer
drugs and market them at very low prices. Now with a product patent in place this
will no longer be possible30.
The post Patent Regime opens up vast opportunities for Indian pharmaceutical firms.
India will emerge as a leading country in the world pharmaceutical market. Presently,
many Indian companies have begun international operations as well as acquisitions
which will make a significant contribution to their turn over. Export will be the major
thrust of the industry, in the post Product Patent regime31.
IMPLICATIONS FOR DRUGS PRICES
A strong Patent system under TRIPs will establish a sort of monopoly. Drugs prices in
India are very low when compared to t A product patent of 20 years in medicines
under the TRIPs Agreement will give rise to patent monopoly. In condition of
monopoly, a high price can be charged, as these prices have no considerations with
the buying capacity of the consumers in developing countries like India, the countries
where product patent is recognized.
The fear that prices of medicines will spiral is unfounded.97% of all drugs
manufactured in India are off patent, and so will remain unaffected. these cover all the
life savings drugs, as well as medicines of daily use for common ailments. In the
patented drug also, in most cases there always alternatives available32.
IMPACT ON AVAILABILITY OF PHARMACEUTICAL PRODUCTS
In addition to high prices, the lack of availability of essential drugs will be affected.
The TRIPs Agreement does not require a patentee lo manufacture an invention in
India. Under TRIPs, patents be shall available and patents rights enjoyable without
discrimination as to the place of invention, the field of technology and whether
products are imported or locally produced. Before enactment of the Patents Act,
1970, the Colonial patents and Designs Act, 1911 permitted foreign countries to block
Indias access to the latest antibiotics and to critical therapeutic discoveries. Between
1947-1957, 90% of drugs and pharmaceutical patents in India were held by foreign

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citizen and les then 1% were commercially exploited in India. The three amendments
to the Indian Patents Act were made alongside intense debates which emphasized that
with the rights of the patent holders strengthened under TRIPs, there is an urgent need
to balance this situation with more effective instruments so as to ensure that the
public interest issues, as for example, access to medicines at affordable prices are also
addressed. The global community took a major step towards bringing about a balance
through the 2001 Doha Declaration on TRIPs Agreement and Public Health. While
the third amendment of the Indian Patents Act takes steps to address some of the more
difficult issues in TRIPs, there remains a need to revisit the key provisions of the
Patents Act keeping in view the imperatives of access to medicines33.
IMPACT ON RESEARCH AND DEVELOPMENT
In the field of R&D, with no Indian pharmaceutical company being equipped to take a
potential drug from the investigational stage to the stage of final market launch,
collaboration with multinational corporations is the norm, resulting in biases in the
choice of therapeutic areas towards lifestyle-related diseases34, like malaria or TB etc.
These diseases kill millions of people each year in developing countries like India.
The medicineS used today were invented about 30 years ago. The change in patent
laws may encourage many firms in India to undertake more research for inventing
more drugs rather than continuing to those drugs once invented by developed
countries in the past35.
Indian industry has never seriously considered in house research and
development or indigenously developed technology as a source of new technologies.
It has depended mostly on imports to provide technologies for new products and
processes. However in the changed environment, the benefits that would accrue to
companies that invest in R& D capabilities would be quite substantial. Strong patent
protection would enable Indian firms to exploit not just but global market as well36.
The development of new drugs is an extremely expensive exercise since the entire
cost of developing a new drug and bringing it into the market has to be borne by the
firm developing it. It is estimated that it takes twelve years and about 200 to 300
million dollars for a US firm to develop a new drug and introduce it into the market37.
Process research would be severely affected as there would be no immediate use of
process technologies for the new drugs in the product patent regime. Research and
development expenditure as percentage of pharmaceutical sales is as low as 1.8% in
India when compared to USA where it is 16%. India companies neither have
adequate funds nor infrastructure to conduct basic research. The majority of patent
filing are from residents of industrialized countries and there is strong relationship
between the volume of patent filings and level of GDP and investment in research and
development. China ,Japan and U.S.A. are the top three ranked countries in terms of
GDP and R& D.In 2007,aboubt 59.2% of world patent filing are filed in these three
countries38.
Indian Pharmaceutical sector has moved into post-product patent regime,
putting end to the long era of launching and manufacturing re-engineered generic
drugs in India. The transitional period to reintroduce product patent regime has
elapsed but the transitional period for transformation of domestic Pharmaceutical
industry to face the challenges in post-product patent regime is still underway, it fails
to protect the public from the aggressive monopolies that patents confer on the right
holders39.
Thus the implication of the TRIPs Agreement for the Indian Pharmaceutical industry
is going to be enormous. The TRIPs Agreement will affect drug prices, their

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availability, and competition. Research and Development are very existence of


the Pharmaceutical industry in India. The ultimate result would be higher prices for
the consumers in India. Drugs and medicines are essential products which should
be made available at affordable prices, especially in a poor and developing country
like India, where as it is, decent health care is out of reach of majority of
population. A uniform patent protection in vital sector like Pharmaceuticals as
applied in developed and industrialized countries with a very high level of economic
development will have enormous economic and social costs in countries like India
and will further aggravate the suffering of the people. Once the country
accepts patenting products, administering prices through the existing government
machinery will be difficulty, us there are no comparable standards.
Monopoly
MNCs claiming high prices on the pretext of recouping their huge outlay in R&D
and long clinical trials cannot be effectively countered.
There is no doubt that India is considered as one of the largest pharmaceutical
industry in the world. Nearly 90% of the domestic demand for pharmaceutical in
India is generally satisfied through indigenous protection. At the same time, imports
are limited to very few drugs, precisely life saving drugs40.
One of the important consequences had been seen in the rise of the prices of drugs. Of
course there is applicable only to those medicines which have been invented only
after the new product laws came into operation i.e. since 2005. So, it is expected that
it would affect only a small proportion of the drugs available in India41.
The TRIPs convention is not going to improve the incentives for investment in the
finding of treatment for new diseases. Therefore, the impact of TRIPs will be
restricted to an elimination of the production of patented products. It will not have a
deleterious or a positive impact on their levels of inventive activity. Even more
importantly, TRIPs is not likely to create any incentive to increase technological
knowledge or create innovations other than that provided by the national system of
innovation.
TRIPs is not likely to increase incentives for multinational Pharmaceutical firms to
invest in, or to collaborate with research and production unities based in developing
countries. By putting a universal minimum standard, India which till now was
supporting the developing countries by offering the cheapest generic version of the
medicines under its process patent regime would not be in position to export these
medicines after adopting product patent regime under the TRIPs. It is among the
few Pharmaceutical industries from the developing countries, posing the capacity to
meet out such unforeseen challenge by taking recourse of flexibilities offering under
the TRIPS and hence ensuring an access to the medicine to the poor peoples42.
A country having agreed to be a party to the TRIPs and to WTO regime is bound to
legislate in harmony with the international agreements phasing out the pre-existing IP
legislations. These new laws not only call for the change in the existing IP laws but
also in many cases take up the need for setting up new and modernized institutions.
Many Intellectual Property laws are at times just rushed through without giving due
weightage to the long-term implications of the new provisions.43.To utilize the WTO
benefits, India has complied with the TRIPs, agreement, otherwise India has to face
the problem.
Significant impact has been felt in India since the establishment of the WTO. In
the wake of the things, several aspects both beneficial and adverse are discussed here.

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Efforts have been made to find out what exactly has happened in India as a whole and
especially to the most important sector, namely, the pharmaceutical sector.
The WTO regime has created excellent opportunities for the developing countries
to increase their exports. However, the developing countries have to improve the
quality of products upon their international standards set up by the WTO
organizations.
CONCLUSION AND RECOMMENDATIONS
At last, I want to say that it will take years to truly evaluate the full impact of
Indias new patent regime on the Indian industries. It is clear that it will change, and
has already changed, the businesses of the indigenous generic Pharmaceutical
industry. With regards to foreign investment in Pharmaceutical research and
development, however, it is less clear whether the recent growth can be primarily
attributed to the new patent regime, or whether it is more the result of lndia's low-cost,
highly skilled scientific human resources. Indeed, many multinational Pharmaceutical
companies (MNCs) have not been entirely satisfied with some of the new laws and
feel that several of the provisions still require further development. The new patent
incentives in India are likely to be at least a significant factor in spurring foreign
investment. If India did not respect Pharmaceutical product patents at all, and if they
were not even attempting to protect intellectual property, it would be much less likely
that MNCs would be investing in India to the degree they have been.

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18

Ramchandaran Asha,Patent and Industry,Yojana,march 2005,p.68


Bird eye
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